While others fall back, go on the attack


February 18, 1991|By Mark Stevens

Tradition has it that during a recession, the three most critica management functions are to cut costs, cut costs, cut costs.

This focus on reducing overhead is a wise way to minimize the impact of a slumping economy, but it is only one side of what should be a two-fisted approach. At the same time management is working to trim the budget, it should also be exploring new waysto increase sales. Remember the old maxim: A good offense is the best defense.

Many entrepreneurs assume that a down economy necessarily dictates against business growth. But that's not true. Look around and you'll see that buying has not ground to a halt. People are still purchasing and charging huge quantities of goods and services.

Although volume is down fromthe high levels of recent years, aggressive entrepreneurs refuse to be paralyzed by statistics. They recognize that with innovation and creativity, they can generate new business in spite of prevailing conditions. To many, this is the ideal time to boost market share while the competition is dozing.

The following tactics are designed to counter the recessionary doldrums by bringing new customers into your camp:

* Call those customers who have stopped buying from you in the last six months. Start the conversation by asking if you have done something to lose their patronage and if you can have the opportunity to win it back. Demonstrate your commitment by offering a refund for poor service or extending a discount on the first order as a courtesy to get the relationship on track again. Think of this as an investment in customer service that can pay for itself many times over.

Identify your competitors' 10 largest customers -- the ones you've always wished you had in your camp -- and target them for an offensive strike. Do so by calling the senior executives responsible for buying your products or services and making them an offer they can't refuse. Promise that if they'll give you a half-hour of their time, you'll prove how you can beat their present vendors in service, price or quality.

"Before you visit these prospects, ask them what about their current vendors leaves them most dissatisfied," says Steve Taback, a sales consultant and president of TEM Associates in Hartford, Conn. "This way you know how to target your pitch to take advantage of your competitors' weaknesses."

* Make it more convenient for customers and prospects to order from you by including fax and toll-free telephone numbers in your advertising, sales catalogs and related promotional material. Make it clear that orders will be taken 24 hours a day. Business people working late or on weekends want the opportunity to place orders at their convenience rather than at a time that suits the vendors. For this reason, companies that have their doors open-around-the clock (even if the doors are telecommunications links) will get the business.

* Experiment with new marketing approaches, including the use of brokers and manufacturers' representatives. These arrangements can provide additional sales power that is paid for on a commission basis only. The bottomline is that you can have the opportunity to reach new markets and to tap new customers without boosting fixed costs. Trade associations and chambers of commerce can help to identify outfits willing to represent your product or service line on a commission basis.

* Explore the potential of bartering. This approach enables you to trade your products or services in return for the things you need to run your company. Although this may not generate additional revenues, it will open a new market for your wares and will cut down on cash outlays. That can be a welcome change in a recessionary period.

* Test a price/volume promotion. This means cutting your prices below the competition -- and heavily promoting your discount policy -- in order to generate substantially higher sales.

Clearly, establishing your company as a price leader can be a potent force in today's cost-sensitive market.

Although lower prices will bring slimmer margins per sale, the higher volume you are likely to generate through the discount policy may yield greater revenues and net profits.

If you've always been reluctant to try this approach for fear that higher volume would not compensate for reduced margins, be aware that this step need not be irreversible. You can always test the waters, trying this approach on a trial basis and then evaluating the results before making a long-term commitment to discounting.

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